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New Business Blooms in Iraq: Terror Insurance

Boss Hog

TRIBE Member
New Business Blooms in Iraq: Terror Insurance

Republished from New York Times
Iraqis have begun to purchase what insurance experts say is the first off-the-shelf terrorism policy in the world.

BAGHDAD, Iraq — Twice in the past year, Muhammad Said has survived assassination attempts that left his car riddled with bullets. He works part time as a bodyguard for his father, a Baghdad city councilman, and helps a friend who has contracts with the American military. Both are very dangerous jobs.

So last month, Mr. Said, a slim, baby-faced 23-year-old, did what a small but growing number of Iraqis are doing: He walked into the offices of the Iraq Insurance Company and bought a terrorism insurance policy. It looked like an ordinary life insurance policy, but with a one-page rider adding coverage for “the following dangers: 1) explosions caused by weapons of war and car bombs; 2) assassinations; 3) terrorist attacks.”

It cost him 125,000 dinars, about $90. Mr. Said paid more than most people because of his risky occupation. The payout, if he dies, is five million dinars, around $3,500, or about what an Iraqi policeman earns in a year.

That guarantee appears to be the first off-the-shelf terrorism policy in the world, insurance experts say. In most countries, of course, there is no need for it: death by terrorism is rare enough that it is usually covered by ordinary accident insurance. In Iraq it is not, partly because the state used to compensate the families of war victims directly. So the Iraq Insurance Company began stepping into the gap about a year ago.

“Am I worth only five million dinars?” Mr. Said asked wearily, after signing his policy. “It is not a solution. But Iraqis can be attacked by anyone, just walking on the street: Americans, insurgents, the Iraqi Army.” The payout is not a lot of money, even by Iraqi standards. But in a country where terrorism kills hundreds of people a month and no one can rely on the government or employers to provide for their relatives afterward, it seems to be an idea with a future.

The Iraq Insurance Company, a state-owned group, has sold about 200 individual terrorism policies in the last year, and is now negotiating with several government ministries and private companies for group policies that would cover thousands of employees.

The idea of insuring ordinary people in what may be the most violent place on earth came from Abbas Shaheed al-Taiee, an executive at the Iraq Insurance Company.

“It is a kind of gift to the Iraqi people,” said Mr. Shaheed, 53, a big, heavyset man with terribly serious eyes and a reputation as a master salesman. “We have expanded the principles of life insurance to cover everything that happens in Iraq.”

Amazingly, the company has yet to pay out on a single claim.

“We have sold policies in Dawra, Ramadi, Falluja,” Mr. Shaheed said, naming some of the most dangerous places in Iraq. “The contract is a good luck charm.”

Mr. Shaheed (whose name means martyr in Arabic) emanates a gravitas that must be an asset in his line of work. He manages a sales staff of about 50 across Iraq, but also sells the policies himself, traveling from one workplace to another, like a kind of bureaucratic Grim Reaper.

He says the terrorism policy makes no distinctions between who fires the shots or detonates the bombs. He would be perfectly willing to insure an insurgent, though he has not done so to his knowledge, he said.

“It is a market here; there are no differences,” he said, in his grim baritone. “We evaluate people’s pockets.”

In the United States and Europe, insurance companies offer customized policies to organizations sending employees to dangerous places, including Iraq (some news organizations, for example, insure their reporters this way). But those policies are highly tailored to each company’s activities and risks, and they are generally expensive.

The idea of a standardized, terrorism life insurance policy appears to be unprecedented, said Robert Hartwig, the chief economist of the Insurance Information Institute in New York.

Some other insurance experts agreed that the policy was a novel one, but said they would hardly call it a good deal. “In an American context, it’s very overpriced,” said Robert Hunter, the director of insurance for the Consumer Federation of America, an association of consumer rights groups. “In America, you could probably get $100,000 worth of life insurance coverage for maybe $125 to $150,” especially a healthy 23-year-old, he said. “And that would cover you no matter how you died.”

Selling insurance in Iraq has never been easy. The first insurance companies here were established in the 1950’s, when they competed with Western companies. But the idea never gained wide acceptance, in part because some Islamic authorities disapprove of insurance, considering it akin to gambling.

Also, many Iraqis preferred to rely on their tribes or families in case of accidents or deaths. The state also played a powerful paternal role: during the Iran-Iraq war, for instance, the government generously compensated the families of soldiers who died, sometimes with a car or property as well as money.

After the Persian Gulf war in 1991 the market shrank further, because foreign reinsurance companies pulled out, forcing Iraqi companies to depend only on their own assets, said Aziz Hassan, a former deputy finance minister.

Strangely, Iraqi insurance companies have done relatively well since the fall of Saddam Hussein, despite a stagnant economy and the uncertainty over Iraq’s future. Six private insurance companies were founded in 2004, and now compete with the two state-owned companies.

The Iraq Insurance Company has renovated its offices — they were looted and burned after the fall of Baghdad in April 2003 — and the company now employs between 250 and 300 people. They have sold at least 2,700 life insurance policies since the fall of the Hussein government.

In 2005, the company’s net income was about $2.5 million at current exchange rates. “We broke records,” said Bassim Mahdi Saleh al-Sheikhli, the company’s managing director. “Business has never before been so good.”

The company attributes much of its success to salesmen like Mr. Shaheed, who now operate more freely — albeit more dangerously — than they did in the past.

“From my point of view, sales is an art,” said Mr. Shaheed, who has worked at the Iraq Insurance Company for 18 years. “For instance, talking to a father with children is different from talking to a man still single. You have to bring out his passion to protect his family.”

Because the salesmen carry money and travel, their own jobs are unusually dangerous. They do not carry guns. Many have bought terrorism insurance themselves, including Mr. Shaheed.

One rule applies to all prospective clients. “When we talk about death and risks, we refer to ourselves: ‘I might die tomorrow,’ ” Mr. Shaheed said. “When we talk about the payment, we say, ‘The company pays you.’ ”

Once a client has agreed to buy a policy, a price is negotiated. It ranges from 60,000 dinars for the safer professions — teachers, businessmen and the like — to 125,000 for policemen and translators for Western companies. The payout is the same regardless.

On a recent afternoon, Mr. Shaheed sat at a desk in his second-floor office, chatting quietly with a potential client. Nearby on the couch sat Basmel Nafaa, a 48-year-old businessman with a bald head and an impish grin. Mr. Nafaa had already bought an ordinary life insurance policy, and was considering buying terrorism coverage too.

“He’s the best we have here in Iraq,” Mr. Nafaa said of Mr. Shaheed. “He’s a good hunter.”

Mr. Nafaa recounted how Mr. Shaheed had approached him at the wholesale market where he often works, as if by chance. The salesman chatted amiably about mutual friends, and then began telling a story about a man who had died without leaving anything for his wife and children. Before long, Mr. Nafaa was sold.

“He hardly even needs to remind you of the dangers you face,” Mr. Nafaa said. “We see it everywhere.”

Mr. Nafaa began offering examples. A few months earlier, his 12-year-old son Joseph was standing outside the family home waiting for a school bus that never came. The boy persuaded his mother to give him money for a taxi. Minutes later, he said, a suicide bomber in a car exploded right next to the bus stop, which is across from the home of a high-level government official. Six people were killed.

Mr. Nafaa showed photographs of his house, which was badly damaged. “I had no insurance at that time,” he said.

Then Mr. Nafaa gestured across the room at his cousin, Baseem Makadsi — the other prospective client — who still has a crease on the back of his skull from where a bullet crashed through the window of his car and grazed him while he was driving to the market with his son.

“If he had not leaned over to speak to his son, he would be dead,” Mr. Nafaa said. “He lost a lot of blood.”

Mr. Makadsi was not yet sold on terrorism insurance. He was thinking of taking his family out of Iraq.

But Mr. Nafaa persuaded himself. “I will buy it,” he said. “There is a big probability to be killed by insurgents here. Higher than anywhere else in the world.”

Alex D. from TRIBE on Utility Room